March 26 (Bloomberg) -- U.S. stocks rallied, extending the market’s best monthly gain since 1974, on better-than-estimated earnings at Best Buy Co. and ConAgra Foods Inc. and prospects for lower labor costs at General Motors Corp.

Best Buy, the largest U.S. electronics chain, jumped 13 percent and ConAgra, maker of Banquet frozen dinners and Slim Jim meat snacks, rose 9.2 percent. GM climbed 14 percent after saying 7,500 union members signed up for buyouts. Research In Motion Ltd. gained 4.9 percent after Goldman Sachs Group Inc. recommended buying shares of the maker of BlackBerry phones.

The Standard & Poor’s 500 Index added 2.3 percent to 832.86, up 13 percent in March. The Dow Jones Industrial Average added 174.75 points, or 2.3 percent, to a six-week high of 7,924.56. The Nasdaq Composite rallied 3.8 percent, erasing its loss for the year. Stocks extended gains as an auction of seven- year Treasuries eased concern that demand for government debt is dwindling.

“I wouldn’t be surprised to see this rally take the S&P up to 1,000,” said Tom Wirth, senior investment officer at Chemung Canal Trust Co., which manages $1.5 billion in Elmira, New York. “It’s been one data point after another that’s come in better than expected.”

Stocks added to an advance yesterday triggered by government data showing unexpected growth in durable-good orders and new-home sales. Those reports tempered reaction to Commerce Department data today that said the economy shrank last quarter at a 6.3 percent annual pace, more than previously estimated while less than the average forecast in a Bloomberg survey.

Gains Extended

Stocks climbed to their highs of the day and Treasuries rose after the government’s $24 billion sale of seven-year notes drew a yield of 2.384 percent, close to the 2.385 percent forecast in a Bloomberg News survey of 10 firms. The auction spurred optimism that the government will be able to continue its record bond sales without spurring higher interest rates.

Best Buy rallied 13 percent to $37.67, its highest price since September, after saying fourth-quarter profit fell less than analysts estimated as results were helped by mobile-phone sales in Europe. Best Buy’s earnings forecast for the year was also higher than analysts projected.

A measure of retailers, hotel and restaurant chains and other so-called consumer discretionary stocks climbed 4 percent to its highest level since January.

ConAgra added 9.2 percent to $16.99, the biggest gain since 2000. The company, which also makes Egg Beaters, Fiddle Faddle popcorn and Fleischmann’s margarine, cut prices for Banquet dinners and cooking oil after record high commodity prices receded and consumers moved to discounted brands.

Dr Pepper Snapple Jumps

Dr Pepper Snapple Group Inc. surged 15 percent to $17.87, its steepest advance since it began trading last April. The drinks maker spun off by Cadbury Plc said earnings will be as much as $1.67 a share this year, more than the $1.61 average estimate of analysts surveyed by Bloomberg.

S&P 500 companies are projected to report profit decreased 36 percent on average in the first quarter and 30 percent in the next, according to analysts’ estimates compiled by Bloomberg. Forecasts show earnings will decline until at least the third quarter, bringing the total slump to nine straight quarters, the longest since Bloomberg began tracking the data in 1998.

GM rose 14 percent to $3.41, the steepest gain in the Dow. The retirements and buyouts of 12 percent of GM’s union workforce open slots for the automaker to hire replacement workers for half the current union rate.

RIM Rallies

Research In Motion added 4.9 percent to $45.04. Goldman Sachs told investors to buy shares of the company ahead of its fourth-quarter earnings results, citing improving margins and valuation.

S&P 500 technology shares collectively advanced 4 percent to the highest level since November. The industry is the S&P 500’s best performer this year with a 7.9 percent rally.

A group of 13 homebuilder stocks across S&P indexes climbed 7.1 percent after the 30-year fixed mortgage rate fell to 4.85 percent, the lowest on record. The government said earlier this month that it plans to increase purchases of mortgage-backed bonds and buy as much as $300 billion of Treasuries in order to bring interest rates down.

“The system is healing itself,” said David Rolfe, who oversees $400 million at Wedgewood Partners in St. Louis. “There’s finally some confidence that the administration has its arms around the problem in the banking system.”

Treasury one-month bill rates turned negative for the first time since December as investors sought the most easily-traded securities to bolster balance sheets at the end of the quarter.

End of Quarter

Banks prefer to carry securities on their balance sheets instead of cash at the end of a quarter, driving demand for bills, according to Donald Galante, chief investment officer and senior vice president of fixed income at MF Global Ltd. in New York.

Chinese solar stocks soared in New York trading after China, the world’s biggest greenhouse-gas emitter, introduced a subsidy to promote alternative energy.

Suntech Power Holdings Co., China’s largest solar-power manufacturer, rallied 44 percent to $11.29 for the biggest gain since going public in 2005. The eight steepest jumps in the Bank of New York Mellon Asia ADR index were solar companies.

‘Bear-Market Rally’

The gain in global equities this month is a “bear-market rally,” said Nouriel Roubini, the New York University professor who predicted last year’s economic crisis. Economists’ forecasts are “way too optimistic,” earnings will “surprise on the downside” and some large banks may go “belly up,” he said in a Bloomberg Television interview in London today.

Laszlo Birinyi, president of Birinyi Associates Inc., recommended investors who own stocks that rose as the equity market rallied in recent weeks to consider selling them.

Wells Fargo & Co., Citigroup Inc. and Bank of America Corp. were among the biggest drags on the S&P 500 today, each falling more than 1.5 percent.

The 1 percent advance in the S&P 500 Financials Index trailed the broader market as Treasury Secretary Timothy Geithner recommended tighter government control over hedge funds, private-equity firms and derivatives markets.

A new systemic risk regulator would have powers to force companies to boost their capital or curtail borrowing, and officials would get the authority to seize them if they run into trouble, according to Treasury’s proposals.

The index of 81 banks, insurers and investment firms has surged 56 percent since reaching a low on March 6 amid speculation Geithner’s plan to help investors buy toxic assets will revive credit markets. The S&P 500 has rallied 23 percent since its 12-year low on March 9.

Raytheon Co. rose 7.7 percent to $40.10. The world’s largest missile maker raised its quarterly dividend by 11 percent to 31 cents a share on its “strong financial position.”

Time to Buy

U.S. stocks have their best intraday returns starting at 2 p.m. in New York as institutional money managers begin buying, an analysis by Bespoke Investment Group LLC showed. Between 2 p.m. and the close, the S&P 500 rose 0.5 percent today. From 3 p.m. to the end of trading, the index increased 1.4 percent.

The S&P 500 is still down almost 8 percent this year after tumbling 38 percent in 2008, its worst annual return since the Great Depression. The Dow average has retreated 9.7 percent in 2009.

To contact the reporter on this story: Lynn Thomasson in New York at lthomasson@bloomberg.net.

Last Updated: March 26, 2009 16:54 EDT